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British India, 1861-1947

In 1861, the Government of India introduced its first paper money, 10 rupee notes. These were followed by 20 rupee notes in 1864, 5 rupees in 1872, 10,000 rupees in 1899, 100 rupees in 1900, 50 rupees in 1905, 500 rupees in 1907 and 1000 rupees in 1909. In 1917, 1 rupees notes were introduced.

The Reserve Bank of India began note production in 1938, issuing 2, 5, 10, 100, 1000 and 10000 rupee notes, while the Government continued to issue 1 rupee notes.

Independent Issues, 1949-

After independence, new designs were introduced to remove the portrait of the King. The government continued to issue the 1 rupee note, while the Reserve Bank issued other denominations, including the 5000 and 10,000 rupee notes introduced in 1949. In the 1970s, 20 and 50 rupee notes were introduced but denominations higher than 100 rupees were demonetized in 1978. In 1987, the 500 rupee note was introduced, followed by the 1000 rupees in 2000.

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Historically, the rupee, derived from the Sanskrit word raupya, which means silver, was a silver coin. This had severe consequences in the nineteenth century, when the strongest economies in the world were on the gold standard. The discovery of vast quantities of silver in the U.S. and various European colonies resulted in a decline in the relative value of silver to gold. Suddenly the standard currency of India could not buy as much from the outside world. This event was known as "the fall of the rupee."

In 1898, the rupee was tied to the gold standard through the British pound by pegging the rupee at a value of 1 shilling 4 pence In 1920, the rupee was increased in value to 2 shillings 10 rupees = 1 pound. However, in 1927, the peg was once more reduced,13⅓ rupees = 1 pound. This peg was maintained until 1966, when the rupee was devalued and pegged to the U.S. dollar at a rate of 7.5 rupees = 1 dollar at the time, the rupee became equal to 11.4 British pence. This period lasted until the U.S. dollar devalued in 1971.

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